5 Common Money Mistakes Seniors Should Avoid

Retirement means no longer waking up at the crack of dawn and spending 45 minutes in traffic, but that doesn't mean you should forget all your cares: you need to keep a close eye on your finances.

In fact, with longer lifespans and expensive medical costs, retirees should be more diligent than ever to avoid these five common money mistakes.

1. Ignoring Inflation

After the recession, many thought it was a wise move to put their investments into accounts low-yield accounts like CDs and bonds. Unfortunately, this means slow-growing money devalued by the rate of inflation. That alone can crack a nest egg wide open.

"A portfolio of bonds and CDs will most likely cause their standard of living to slowly deteriorate over time as inflation eats into the purchasing power of their dollars," says Scott O'Brien, a financial planner with the financial planning company WorthPointe.

To counter this, seniors should include stocks in their portfolio for a growth component. Some experts estimate a long-term inflation rate of 3% to 4%, so the interest should be higher than that.

And low-yielding CDs and bonds aren't exactly worthless. They're good for quick access to cash so you can keep long-term investments undisturbed.

2. Not Saving Enough

With the average life expectancy at about 85, seniors must plan for a longer retirement--yet many don't understand how much money it actually costs to retire.

The trick to beat this money mistake? Plan way, way ahead when calculating your retirement income.

Tim Shanahan, founder of the financial services company Compass Securities Corporation, says retirees should plan as if they will live to be 100, not just ten or even 20 years past retirement age.

"They often disagree until we question them, 'What if you're wrong? Where will the funds to live on come from if you spend out at some arbitrary age like 80?'" says Shanahan.

3. Not Planning for Medical Care

On top of the general cost of day-to-day living, seniors also have to worry about the bank-draining cost of medical expenses.

According to Fidelity Investments, a retired couple needs about $220,000 set aside for medical expenses during retirement. That cost doesn't factor in retirement homes, assisted living, or in-home care.